Think your Internet blows? Try $300 for 3Mbps DSL and a data cap

Rural ISP's financial problems lead to high prices and data overage fees.

People in Winthrop, Iowa and several nearby towns are mad about the price of their Internet service, and we can't blame them.

The East Buchanan Telephone Cooperative (EBTC) offers DSL Internet at sub-broadband download speeds for up to $300 a month, and it imposes data caps with overages of $5 per gigabyte. As detailed on the company's website, service starts at $24.95 for 5GB per month and moves up to $44.95 per month for 10GB, $179.95 for 50GB, and $299.95 for 100GB. Regardless of which plan you choose, going over your cap brings a charge of $5 more per gigabyte.

EBTC

You can see the full price list to the right.

The base prices provide only 3Mbps throughput downstream and 1Mbps upstream. (The upload speeds are listed incorrectly on the EBTC site, but the company's GM gave us the correct numbers.) The US Federal Communications Commission defines broadband as 4Mbps download and 1Mbps upload. To get broadband download speeds from EBTC, you'd have to pay another $4.95 per month for an upgrade to 6Mbps down and 1Mbps.

That's not all. The company will charge you another $10 per month to rent a DSL modem or $69.95 to buy the modem. Naturally, there's also a $49 up-front charge to install the DSL service.

EBTC glowingly describes its DSL as being "up to 20 times faster than a standard dial-up connection! Complex graphics pop-up instantly. You can send and receive huge files in seconds. With DSL, you’ll experience the Internet the way it was meant to be experienced. And all for as little as $15.00 more per month than your standard dial-up connection!"

David McElroy isn't impressed. He filed a Change.org petition asking the DSL provider to "[s]top pricing home internet like cellular internet." The petition, which has 423 signatures, says the current prices and caps were implemented on December 26, at the same time that base download speeds rose from 1Mbps to 3Mbps. On January 9, "McElroy and approximately 25 disgruntled customers met with the EBTC Board about the issue during the Board’s regular monthly meeting," the Independence Bulletin Journalreported three days ago. McElroy lives in Dubuque, Iowa, but he said his parents, brother, and sister live in Winthrop, where he also grew up.

The trouble with rural broadband

Unfortunately, this story doesn't seem likely to have a happy ending. EBTC General Manager Butch Rorabaugh explained to Ars last night that the company has to offset revenue losses in phone service and federal funding. A written response the company made to McElroy's petition says the money it makes from access charges fell from $738,929 in 2009 to $456,701 in 2013. Additionally, government funding designed to prop up rural broadband service fell from $454,200 in 2009 to $169,196 in 2013.

The access charges are "basically what we charge long distance companies for using our facilities to originate or terminate messages," Rorabaugh said. "Access charges—they used to be a mainstay of the telephone industry and now it's gone down drastically." The cuts in government funding are due to changes in the Federal Communications Commission's Universal Service Fund, he said.

Some ISPs would be able to absorb dramatic changes like that, but not EBTC, according to Rorabaugh.

"The challenge we face is serving a rural area," he said. "We have a little over 1,000 customers. We serve an area that is 165 square miles." That leaves EBTC with less than seven customers per square mile, making the cost of providing wireline infrastructure quite large on a per-home basis, he noted.

EBTC also provides service that's cheaper to maintain in the form of a wireless home Internet product, which sends signals over the 3.65GHz band to antennas on customer homes. That service provides the same download speeds of 3Mbps and 6Mbps but larger upload bandwidth of either 2Mbps or 4Mbps. Initially, EBTC priced the wireless home Internet service at exactly the same monthly rates as its wired service, but it lowered the prices on some of the higher-end wireless tiers in response to complaints. The wireless service requires a $149 up-front equipment fee and an installation fee of $49 (the latter fee is often waived, Rorabaugh said).

The rural broadband problem is no doubt a huge one. There are some lucky people out there, though. We wrote about an ISP in rural Vermont that was offering gigabit fiber and phone service for just $48 a month, but that was achieved only with the help of $116 million in federal funding. That kind of government largesse isn't going to every rural part of the US by a long shot.

According to the Bulletin Journal's account of the board meeting, Rorabaugh recommended that customers trying to preserve data change quality settings on services like Netflix to get a lower-bandwidth stream. Rorabaugh reportedly also said at the meeting that the EBTC will consider special packages for people who work at home, take online classes, or have other "unique situations."

But while the company lowered some of its wireless prices, Rorabaugh told Ars that "the board has decided that we're going to leave our wireline" prices the same. About 70 percent of its customers use 15GB or less per month, which costs $64.95 per month.

EBTC may die “if we do not change to measured Internet”

McElroy isn't buying the argument that the EBTC can't offer unmetered service and lower prices. His petition accuses EBTC of "decid[ing] to price DSL and their new wireless offering similarly to cellular Internet since they do not have any other competition."

Moreover, "All other communities near Winthrop, Quasqueton, Aurora, and Stanley do not charge for the amount of data that someone uses," he wrote. ISPs in nearby towns offer comparable speeds, without data caps, for $30 to $50 a month, he wrote.

Rorabaugh acknowledged that nearby ISPs offer lower prices, but he argued that it's only a matter of time before they raise them, too. "As I look at our company and what's going on, I know we have to make a change," he said. "It's difficult being the first one out of the gate. Just because other people are doing it that way doesn't mean they're making money out of it."

In his written response to McElroy, Rorabaugh said, "We considered an overall increase to our previous packages but thought it was unfair for the 70% who use less than 15GB to subsidize the 10% who consume 50GB - 100+GB. We have attempted to construct a pricing structure that fits a majority of our actual customers and offer discounts up to 40% for larger users. Although measured Internet may not be popular, I am genuinely concerned about the long term survival of EBTC if we do not change to measured Internet."

McElroy pointed out that EBTC is already profitable. He posted a financial document showing that EBTC made $241,279 in net margin on $2.28 million in operating expenses in 2012. Those numbers don't account for the latest access charges and Universal Service Fund revenue figures. While USF money for EBTC actually rose more than 7,000 from 2012 to 2013 after years of sharp declines, access charges continued to plummet with a year-over-year drop of $143,000.

Rorabaugh wishes large content providers had to pay to send data over his network. "Netflix can come in and use the network that exists here and not have to pay a penny for it," he said. "You would think they would be obligated or should feel obligated to help support the network that generates their revenue."

He may get his wish thanks to a recent court ruling striking down much of the FCC's net neutrality law.

In the meantime, he said EBTC had to find a way to offset at least part of the lost access charge and USF revenue. "We're not trying to recover all of the lost revenue from our Internet customers, but we do think its pretty clear that Internet traffic dominates our market and it does have to bear a larger portion [of the cost]," he said.

“Best Buy offers free shipping right now”

Leaving aside the question of EBTC's finances, it's hard not to feel for residents with such poor Internet options. Even Comcast's new data limits start at 300GB and have much cheaper overage charges, $10 for each additional block of 50GB.

McElroy pointed out that operating system upgrades can require downloads of several gigabytes of data and that games downloaded from Steam can even require 40GB. If EBTC has any customers interested in downloading large games, they're probably not happy with Rorabaugh's response: "I am not a ‘gamer’ but have noticed that Best Buy offers free shipping right now," he wrote.

Even for residents who aren't gamers, there are risks in purchasing too low a data package when it costs $5 for each extra gigabyte. Bandwidth-heavy Internet services are here to stay, and they will only grow more cumbersome for customers who need more than basic e-mail and Web surfing.

One Aurora, Iowa resident who signed the Change.org petition wrote, "We shouldn't have to give up streaming Netflix, working at home, and taking online classes or doing school work, or have to watch our usage like a hawk in fear we go over our mediocre plans. In today's world, there's no reason this can't be made affordable."

Promoted Comments

Another ISP says Netflix should pay them for the data moving over their network, conveninentoy ignoring the fact that they're already being paid for it. Netflix pays their ISP for upload/download. That ISP then negotiates rates with a T1 (unless they are one), who in turn negotiates rates with otber providers, who negotiate with end user ISPs, who deliver content. Everyone in this chain is getting paid for the data coming from Netflix (either with money, or reciprocal data transmission - AKA a peering agreement). Netflix isnt directly paying the end user's ISP because they arent the ones pushing the data at that point - they've already paid for the transmission.

This is like saying anyone selling something secondhand must also pay the original manufacturer again. Its absurd. The ISP is already being paid by both its end user and by whatever peer is delivering the Netflix data to their network, and they want to be paid a third time!.

No guys, see, this is the success of the legislated ISP oligopoly we have now. They charge the same price across the country, which is higher than the market equilibrium in urban areas, so they can use that money and their economies of scale to charge a price well below equilibrium in rutal areas! If rural areas were only serviced by small ISPs, they'd have to charge exorbitant prices for lower-quality service. It really is a good thing we've got Comcast and Verizon out there helping the residents out!

Oh, what's that? They don't use their inflated urban prices to subsidize rural customers? What? There are no rural customers? It's all small ISPs or outdated infrastructure? The market leaders are getting the forced oligopoly AND the massive profits? Good on you, government!

I wouldn't say it "blows" but anyone who has used Comcast for a long time and watched their bill climb ever skyward with only minimal improvements in bandwidth every couple years, knows it ain't worth bragging about either. I just spent literally 10 days emailing their "special customer service department" for persisting issues... and the following things were true when everything was finally resolved:

1) They were not smart enough to assign my case # to 1 or 2 people, instead every single a day a different person picked up where the prior person left off, causing confusion and frustration on both sides.

2) They make a big "apology offer" once you corner them with the facts, that your bill no longer approximates anything reasonable WRT to the service level your'e receiving (it might've been reasonable 5 or 6 years ago, but it's not anymore because the service has barely changed while your bill might be $20-$50 higher per month, depending on whether you bundle or not).

3) They force you to get on the phone at the end of the process, at which point they "bait and switch", telling you only at the very end about "that one extra fee" that will be incurred and "that one thing they told you about" which they're not actually going to do for you because "they told you wrong".

Comcast is the perennial example of what happens when you give a big company regional monopolies and make it easy for them to ice other providers out of the network infrastructure. Luckily Mediacom and a couple other providers are slowly making inroads to Comcast markets, with better tiers and better pricing -- at least in and around Chicago.

"Rorabaugh wishes large content providers had to pay to send data over his network. "Netflix can come in and use the network that exists here and not have to pay a penny for it," he said. "You would think they would be obligated or should feel obligated to help support the network that generates their revenue.""

Comcast is the perennial example of what happens when you give a big company regional monopolies and make it easy for them to ice other providers out of the network infrastructure. Luckily Mediacom and a couple other providers are slowly making inroads to Comcast markets, with better tiers and better pricing -- at least in and around Chicago.

Exclusive access contracts have been illegal for years now, and to the best of my knowledge all of the old ones have expired.

However, the economics of wiring a city with a second provider are iffy. First in wins.

No guys, see, this is the success of the legislated ISP oligopoly we have now. They charge the same price across the country, which is higher than the market equilibrium in urban areas, so they can use that money and their economies of scale to charge a price well below equilibrium in rutal areas! If rural areas were only serviced by small ISPs, they'd have to charge exorbitant prices for lower-quality service. It really is a good thing we've got Comcast and Verizon out there helping the residents out!

Oh, what's that? They don't use their inflated urban prices to subsidize rural customers? What? There are no rural customers? It's all small ISPs or outdated infrastructure? The market leaders are getting the forced oligopoly AND the massive profits? Good on you, government!

I wouldn't say it "blows" but anyone who has used Comcast for a long time and watched their bill climb ever skyward with only minimal improvements in bandwidth every couple years, knows it ain't worth bragging about either. I just spent literally 10 days emailing their "special customer service department" for persisting issues... and the following things were true when everything was finally resolved:

Speak for yourself. I've been a Comcast customer for 6 years and I'm only paying $90/mo for 250 Stations, 50/25 Internet, and Home Phone, HBO, Cinemax, Starz, and an X1 DVR. (Okay, Taxes and Fees might put it over, but $110 MAX.)

This is exactly why the Canadian government regulates flights within Canada (not done perfectly mind you but attempted). Otherwise flying to the Northwest Territories would be far too pricey (already not cheap). The price has to be spread out amongst all to ensure that all have access so the people that fly Toronto to Montreal help pay for the few that need to go to Iqualuit.

And before everybody freaks out and says they should move if they don't like the high prices, you should remember who it is that grows your food. All need access to information in a timely fashion without being gouged.

And before everybody freaks out decrying the sky-high price of internet remember that the price they charge you has nothing to do with cost. They are charging these prices because they can (another thing that should be regulated).

Another ISP says Netflix should pay them for the data moving over their network, conveninentoy ignoring the fact that they're already being paid for it. Netflix pays their ISP for upload/download. That ISP then negotiates rates with a T1 (unless they are one), who in turn negotiates rates with otber providers, who negotiate with end user ISPs, who deliver content. Everyone in this chain is getting paid for the data coming from Netflix (either with money, or reciprocal data transmission - AKA a peering agreement). Netflix isnt directly paying the end user's ISP because they arent the ones pushing the data at that point - they've already paid for the transmission.

This is like saying anyone selling something secondhand must also pay the original manufacturer again. Its absurd. The ISP is already being paid by both its end user and by whatever peer is delivering the Netflix data to their network, and they want to be paid a third time!.

Hey, it's better than what I pay - $422/month for 1.5Mbps symmetrical - T1 line. Only service available other than satellite where I live - 10 miles outside the city limit of a high tech research park where there are multiple service providers.

This is one of many reasons why the USA should have a nationalized fiber network.

The network could then be leased to providers who compete based on price and service.

Instead, right now we subsidize private companies to build out networks, grant them monopolies, and they in turn do next to nothing resulting in an extremely slow and expensive network, while at the same time ensuring that very little (if any) competition exists.

To people who think they can easily lower the price, I suggest you try founding your own ISP, buy all the equipment, feed all those employees (and their families), and be a hero to the rural community and the rest of the armchair quarterbacks on Ars.

I understand contracts and all, but it doesn't make sense that someone on the 10GB plan would pay $45 a month, but someone on the 5GB plan who used 10GB would have to pay $50 (25 + 25 for overage).

Committing to paying for 10GB even when you don't use it gives you a discount on the first 10GB. You find that surprising how?

Not surprised I guess. Power companies do this. In my town if you have a demand of 250kW or more your cost per kWH is cheaper. Then again, there is no "overage" with electricity. You just pay for what you use. If you fall below 250kW demand there's a penalty for being on that rate. You just commit to a certain level of demand and not a certain amount of usage.

Wait, isn't this why I'm paying extra taxes and tariffs on my phone and internet? To subsidize these rural deployments? Where's that article that Ars had on how wasted that money was, seems topical.

Exactly -- I thought this was what the Universal Service Fund was all about?And, I'm pretty sure there's a corresponding "Internet for the Internet-less" fee that I pay on my broadband bill.

ISTR there's a huge surplus in these funds, and if this community isn't supposed to be a recipient of them, then how bad off do you have to be? (Or, have they all been reallocated and spent on something else?)

Why are the data caps required? Why do they charge 5GB per gigabyte over?

I want to see the cost analysis on a gigabyte basis for their business. How much does it cost them to run 10GB to someone's home vs 200 GB to another over a month period?

I understand your line of thought, but the guy already said quite clearly it had nothing to do with cost.

Most of the cost is likely fixed and has nothing to do with monthly internet traffic. It probably doesn't even have much to do with internet service in general.

Faced with declining "government dictated" sources of revenue, they've decided to shift the burden to internet users and to those using the most bandwidth in particular. The alternative being increasing prices allround.

Making it metered makes sense until you start punishing your most active users so much that they just stop consuming. Then your revenue decreases anyhow, and prices will have to increase allround. But it's likely that there is a point of equilibrium where you can charge the top 10% more than everybody else.

1,000 customers over 165 square miles is never going to be economical with wired connections. These people either need to switch to cellular or satellite technologies, or move.

If they move you wont get food.

Chances are, if they actually do run a farm, they aren't exactly exceeding 10GB/mo. They're kinda busy....

You'd be surprised how much farm equipment is now highly technical, from satellite uplinks to Wi-Fi connections.

Exactly. Satellite guided self-driving harvesters and tractors. Using satellite imagery to monitor crops, accessing a large variety of online resources including USGS data and so on to plan your growing season. I work for a company that is owned by farmers - they aren't a bunch of luddites who fear computers. They need access to do pricing, selling, setting fuel and seed contracts - you name it. Everyone needs internet access and just because someone chooses to live in a more remote area doesn't mean they should be screwed over. I'm tired of city dwellers copping superior attitudes towards those who live in the boonies.

1,000 customers over 165 square miles is never going to be economical with wired connections. These people either need to switch to cellular or satellite technologies, or move.

Satellite connections are unusable for any gaming purposes. Cellular is fine, if the towers exist. In many places they don't. Even then, there are the same ridiculous data caps.

As for moving, I don't think you understand what qualifies as "rural." I currently live in a suburban area with FIOS. I pay $80 a month for a 50/50 connection. I own a few acres which I plan to build a home on 10 miles away from my current house. That location is only served by this type of rural ISP. They have a similar pricing structure. This isn't 100 miles from anywhere; it's 10 miles.

These types of ISPs are price gouging, and refusing to invest in viable long term technologies. There are both wired, and wireless connections which can provide gigabit level service for reasonable prices. The 3Mb/s connections for $300 a month are obscene.

I wouldn't say it "blows" but anyone who has used Comcast for a long time and watched their bill climb ever skyward with only minimal improvements in bandwidth every couple years, knows it ain't worth bragging about either. I just spent literally 10 days emailing their "special customer service department" for persisting issues... and the following things were true when everything was finally resolved:

1) They were not smart enough to assign my case # to 1 or 2 people, instead every single a day a different person picked up where the prior person left off, causing confusion and frustration on both sides.

2) They make a big "apology offer" once you corner them with the facts, that your bill no longer approximates anything reasonable WRT to the service level your'e receiving (it might've been reasonable 5 or 6 years ago, but it's not anymore because the service has barely changed while your bill might be $20-$50 higher per month, depending on whether you bundle or not).

3) They force you to get on the phone at the end of the process, at which point they "bait and switch", telling you only at the very end about "that one extra fee" that will be incurred and "that one thing they told you about" which they're not actually going to do for you because "they told you wrong".

Comcast is the perennial example of what happens when you give a big company regional monopolies and make it easy for them to ice other providers out of the network infrastructure. Luckily Mediacom and a couple other providers are slowly making inroads to Comcast markets, with better tiers and better pricing -- at least in and around Chicago.

I have so many nightmare stories about dealing with Comcast...

When I moved and canceled my service (because my current building has FiOS), it took forever to get them to schedule everything in a way where they would just come to my old apartment and pick everything up. They weren't offering me pickup dates until after I'd moved out, but I knew the apartment was going to be vacant for a couple of weeks, and I'd checked with the daytime concierge that it'd be fine for her to let the Comcast guy up to get the equipment (making it clear that the Comcast equipment would basically be the only thing left in the apartment). I actually wound up paying for a week that I didn't use, because of how impossible they made it to properly set up the cancellation.

Then after a month I get a letter letting me know that I'm not getting my refund until I return their DTA. Um, what? I've already returned everything to you, so how I can return your DTA? I called the number specified on the letter--a number which, brilliantly, pretty much only puts you through to voicemail, but only after making you wait on hold for five minutes (uh, hello, if you're going to put me straight to voicemail don't make me hold).

I then called the regular customer service, and they could see my account and that I was owed a refund, but insisted that they could not handle it and that they could not escalate it to anyone who could--I had to call the number from the letter. When I noted that it just puts you through to voicemail, I got an "I don't give a fuck" reaction--"yeah, that's basically how it works."

So I leave a voicemail, and something like a week or two later I get a call that they're "doing an investigation"...two weeks after that, I still haven't heard anything. Finally someone suggests that I tweet @comcastcares about my issue--I got a tweet back almost immediately, and my issue was resolved by close of business the same day. Apparently, despite what the letter said about returning their DTA, the problem was actually that the pickup guy marked that the modem was missing--despite it being listed on my account that I'd provided my own modem.

The timeline for all this? I moved out of my old apartment on May 5th. I didn't get my issue with Comcast sorted until August 2, and finally got my refund check a week later. Three months to solve something which should be routine. Absurd.

To people who think they can easily lower the price, I suggest you try founding your own ISP, buy all the equipment, feed all those employees (and their families), and be a hero to the rural community and the rest of the armchair quarterbacks on Ars.

The problem is that these companies aren't investing in new technology. They're trying to operate using 15 year old dsl in a world where moving a gigabyte per hour is commonplace. There exist high speed wireless technologies, but these companies do not invest in them. We know these exist because it's what your smart phone uses. Instead, because there aren't enough people to throw a fit, they rely on old outdated infrastructure and jack up prices as usage increases.

Does the new infrastructure cost money? Of course it does. And it's perfectly reasonable to pass that on to local consumers or developers. But once that infrastructure is in place the cost of running the network is nowhere near what they're charging.